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June 16, 2010

Fidelity Says Investors Stuck by Their Advisors After Market Bottom

In survey, advisors expect higher taxes and regulations to change their business practices

Investors remained loyal to their advisors and brokers after the financial crisis bottomed out in March 2009, according to the 2010 Fidelity and National Financial survey released by Fidelity Investments on Tuesday, June 15.

Fidelity said that one-fifth of investors surveyed indicated that their relationships with their service providers had improved measurably over the past year. This compared with just 9% who responded to a similar advisor-client relationship question in a 2009 survey about the effects of market turmoil in late 2008 and early 2009.

The survey found that 70% of advisors believed their relationships with clients had improved in the past year, up from 38% in last year's Fidelity survey. For their part, nearly half of investors who work with an advisor indicated they would likely follow their advisors if they were to move to a new practice.

With their client relationships strengthened, 44% of advisors attributed their firm's organic, non-market-driven growth over the past year to increases in assets from existing clients. In addition, 37% said client referrals had contributed to their growth. In last year's Fidelity survey, these two factors represented significantly lower growth channels (23% and 24%, respectively).

But even though advisors have enjoyed growth from asset consolidation and referrals, they still feel these will be priority areas for them in the coming year, with 30% indicating their biggest challenge will be obtaining new clients and 21% citing the need to grow their business.

The survey also found that advisors and brokers expected tax increases and regulation to be the main drivers of change in the way they do business in the next 12 months.

In the event of another financial crisis over the next three years, 36% of investors in the survey said they expected their advisors to help them achieve gains, while 55% expected them to minimize losses.

Consistent with their expectations for financial gain, investors said that determining where to invest will be their primary investment challenge over the next year. They said two of the chief benefits of working with a broker or advisor are the ability to receive investing ideas that can help maximize gains and/or minimize risks and losses.

From their perspective, 69% of advisors and brokers believed their clients would expect them to minimize losses, while 24% said their clients would expect them to achieve financial gains.